US Inflation from 1979 to 1985
US inflation from 1979 to 1985 was +48.2%. $100 in 1979 had the same purchasing power as $148.21 in 1985 (avg. +6.78%/yr).
$100.00 in 1979 is worth
$148.21
in 1985
+48.2%
+6.78%/yr
How prices changed from 1979 to 1985
| Item | 1979 | 1985 | Change |
|---|---|---|---|
| Gallon of gas | $0.90 | $1.20 | +33% |
| Loaf of bread | $0.43 | $0.78 | +81% |
| New home (median) | $62,900 | $84,300 | +34% |
| Median household income | $19,587 | $27,735 | +42% |
| Movie ticket | $2.47 | $3.55 | +44% |
| Annual college tuition (public) | $584 | $1,386 | +137% |
What Drove Inflation from 1979 to 1985
Stagflation: The 1973 Arab oil embargo sent oil prices quadrupling almost overnight, triggering a global recession and double-digit US inflation simultaneously. A second oil price shock in 1979–80 doubled energy costs again. The toxic combination of high inflation and high unemployment — stagflation — exposed the limits of traditional demand management. Paul Volcker's appointment as Federal Reserve chairman in 1979 marked the turning point, as aggressive rate hikes eventually broke the inflationary spiral.
Disinflation: Volcker's medicine worked, but at a steep price: the 1981–82 recession was the deepest since the Depression, with unemployment exceeding 10%. Inflation fell rapidly from above 13% to below 4% by 1983. The subsequent expansion was long and vigorous, supported by falling oil prices, deregulation, and tax cuts. The Federal Reserve established credibility as an inflation fighter, anchoring expectations and keeping prices relatively stable through the rest of the decade.
Understanding the Numbers
Over these 6 years, prices rose significantly — a total inflation rate of +48.2%. The annualized rate of +6.78% per year was well above the historical average of roughly 3.3% per year.
Compare Other Periods
Starting from 1979:
Ending in 1985: